Gennum Reports 2007 Fourth Quarter and Year-End Results

Burlington, Ontario (February 1, 2008) – Gennum Corporation (TSX: GND) today reported unaudited financial results for the fourth quarter and fiscal year ended November 30, 2007.

($ millions except per share amounts)

"2007 was a year in which we took significant actions to focus our Company. By executing to our strategic plan, we delivered above average industry growth and have good momentum to build upon for 2008. Our investments in our global sales infrastructure and new product development are paying off as we are securing more design-wins with our existing customers and gaining new business in high-growth adjacent markets," said Dr. Franz Fink, President and CEO of Gennum. "As we continue through 2008, you can expect to see a broad set of new product introductions, a strong emphasis on driving operational excellence and an ongoing commitment to build the best high-performance team in the industry. While we have made significant progress this past year, we will continue to execute upon our well-defined strategy with speed and clarity to further strengthen the Company and maximize shareholder value."

Revenue
Our 2007 fiscal year represented a transition year for us as we executed on several actions to sharpen the focus of our portfolio and build around our core business. As a result, the following components of the Company qualified as Discontinued Operations for the purpose of reporting 2007 performance: Headsets, Hearing, Manufacturing, Falcon™, and VXP® Image Processing.

In terms of Continuing Operations which encompasses our video and data communications product lines, the financial performance was solid as this business exhibited revenue growth, high gross margins and strong operating returns. Compared to 2006, our consolidated revenue grew over 6%. The stronger Canadian dollar, relative to the US dollar and Japanese yen, reduced consolidated revenue by $4.6 million in 2007 compared to 2006. Before currency impacts, the increase in revenue over 2006 was 10.7%.

Consolidated fourth quarter revenue of $29.9 million in 2007, was 14% higher than the same quarter in 2006 primarily due to higher revenue in the Data Communications and Video segments. Before currency impacts, consolidated fourth quarter revenue grew by about 25% over the prior year. The stronger Canadian dollar reduced consolidated revenue by $3.1 million in the quarter.

For the year, Video products revenue was $83.3 million, a small decrease from the prior year. Before currency impacts, the year-over-year revenue was an increase of 1.5%. During the fourth quarter of 2007, Video products revenue increased by 3% in the quarter to $21.3 million, compared to the same quarter in 2006, as decreased standard-definition revenue was offset by an increase in high-definition products revenue. Before currency impacts, Video products revenue grew almost 14% over the prior year. The impact of the stronger Canadian dollar reduced Video products revenue by $2.3 million in the quarter.

In Data Communications, product revenue continued to grow significantly, as year-end 2007 sales grew by 44% over the prior year. Before currency impacts, revenue grew by over 50%. Fourth quarter 2007 revenue rose to $7.6 million in the quarter from $5.1 million in the same period last year, a 49% gain due to increased sales from high-speed (10 Gigabits per second) XFP optical transceiver products. Revenue growth before currency impacts would have been over 60%. Currency impacts reduced Data Communications products revenue by $0.8 million in the quarter.

Consolidated gross margin as a percentage of revenue declined in 2007 by 1.5% to 76%, primarily due to currency and pricing pressures. Gross margin dollars increased by $3.3 million in 2007. During the fourth quarter, gross margin dollars increased by 10% to $22.4 million, despite the strengthening of the Canadian dollar and pricing pressures in the marketplace. Gross margin as a percentage of revenue in the quarter was 75% versus 77% in 2006, which continues to place us at the leading edge of technology industry performance for this ratio.

For the year, sales, marketing and administration expenditures increased to $28.3 million, up $3.3 million compared to 2006. Fourth quarter expenses increased to $9.3 million in 2007 from $7.3 million in 2006. Of the increase in the quarter, $0.6 million related to a re-allocation of accrued expenses between this area and R&D expense. In order to achieve the aggressive strategy to optimize our Company, we invested in the fundamental activities such as broadening our sales presence, accelerating new product introductions, branding and corporate business development. Now, with a stronger foundation, we expect 2008 sales, marketing and administration expenditures to be reduced in the first quarter.

In 2007, our investment in R&D increased by $4.7 million compared to the prior year investment of $20.4 million. As a percent of revenue, 2007 spending was 23% compared to 20% in 2006. R&D expenses in the fourth quarter of 2007 increased to $6.2 million from $3.8 million in the fourth quarter of the prior year. This increase is a result of aligning our product roadmap investment for video transport, data communications and consumer connectivity products in 2007 to be more in line with our Company’s new focus. The timing of taping out new products also contributed to the year-over-year increase in R&D spending. The inclusion of the Snowbush Microelectronics acquisition in October added $0.7 million to R&D expense in the fourth quarter of 2007. The spending related to Visual Excellence Processing® technology (VXP®) is now included in Discontinued Operations.

During the fourth quarter of 2006, we incurred a $2.0 million restructuring charge primarily related to severance accruals caused by a 6% reduction in our workforce in late 2006 and further restructuring activities that took place in the first two quarters of 2007.

Other income (expense) was an expense of $0.6 million in 2007 versus income of $0.7 million in 2006. The 2006 income related primarily to foreign currency gains while the 2007 expense included a write down of our investment in Nanoscience of $0.7 million.

Net earnings from continuing operations in 2007 was $22.3 million or 20.3% of revenue. This result compared to net earnings of $26.6 million in 2006. In the fourth quarter, net earnings from continuing operations was $4.4 million in the fourth quarter of 2007 or $0.12 per share versus $5.1 million or $0.14 per share in 2006. Discontinued operations contributed a loss of $4.8 million or $0.13 per share in 2007 versus a loss of $2.3 million or $0.06 per share in 2006. More information related to Discontinued Operations is found in note 2 of the financial statements.

Financial Condition
The cash and cash equivalent balance at November 30, 2007 was $34.2 million, a decrease of $10.8 million from the end of the prior quarter and a decrease of $13.3 million from the end of the 2006 year. The primary reason for the decrease in each period was the acquisition of Snowbush Microelectronics late in the fourth quarter. Divestitures are expected to contribute $22.0 million to our cash balances in the first fiscal quarter of 2008.

Product and Customer Developments
We launched ActiveConnect™, the longest reach, highest performance high-definition multimedia interface (HDMI) connectivity solution. Supporting distances up to 100 meters, the ActiveConnect™ solution is being integrated into new consumer connectivity products by Belden, Gefen, Orbital Development, Liberty Cable and Kramer Electronics.

We are expanding our CDR portfolio and developing innovative ways to bring cost and performance benefits to the rapidly growing SFP+ module market.

We secured new data communication product design-wins with some of the top optical module manufacturers in Asia, Japan and North America.

By adding the significant silicon-proven IP library to our portfolio of offerings, we are seeing an increased interest from our existing customer base to leverage these advanced IP cores in their next-generation products.

Other Developments
In January 2008, Gennum and Sigma Designs announced the companies reached a definitive agreement for Sigma’s purchase of Gennum’s VXP® image processing business. Sigma will acquire all aspects of the VXP® Group including, but not limited to, products and intellectual property and approximately 40 employees will be joining Sigma Designs as part of the sale. The transaction, which is subject to customary closing conditions, is anticipated to be completed by mid-February 2008. Cash proceeds from the sale of the VXP® business will be approximately US $18.0 million.

This is the third sale of non-core assets over the past six months. As previously announced, Gennum's hearing instruments products and manufacturing operations were sold to Sound Design Technologies, a Gores Equity portfolio company, in October 2007 for approximately $12.5 million, while Gennum's consumer headset business was sold to CellPoint Connect (Canada) Inc. in August 2007. The land and building associated with the sale of our hearing and manufacturing operations closed for an additional $4.2 million cash in December 2007.

In October, Gennum completed its acquisition of Snowbush Microelectronics, one of the leading suppliers of analogue and mixed-signal intellectual property (IP) cores, for approximately $24 million. This acquisition accelerates Gennum’s new product introductions for 2008 and beyond. This, coupled with the experienced mixed-signal design team and extensive CMOS process expertise, makes Snowbush Microelectronics an ideal complement to drive future revenue growth. The transaction is forecasted to contribute approximately $10 million in revenue to Gennum and be earnings accretive in 2008.

Continuing to broaden the Company’s global sales organization, Gennum announced the appointment of Ewald Liess as its European Sales Director, as well as the opening of a sales and support office in Munich, Germany. The new office allows Gennum to work more closely with its local distributors to create deeper relationships with new European customers and provide improved support to our existing customers in the area.

Patent litigation
As previously disclosed, we are the subject of a patent infringement claim in the US courts. This claim relates to a limited number of non-core Gennum products. A judgement received in June, 2007 ruled that the Gennum devices which were the subject matter of the claim, did not infringe most of the asserted claims, and that the rest of the other asserted claims were not valid. The case has been appealed and Gennum has cross-appealed. It is our expectation that the appeal will be heard in mid-2008.

In the ordinary course of business activities, the Company may become involved in litigation or claims with customers, suppliers, former employees and third parties.

Normal Course Issuer Bid
During the quarter, the Company acquired 131,800 common shares out of the market at an average cost per share of $10.66. On a year-to-date basis, the Company has acquired 167,000 common shares at an average cost per share of $10.72, for total cash consideration of $1.8 million.

Outlook
Semiconductor industry analysts forecast a 7.7% growth rate for 2008 versus 3.8% in 2007. With our focus in optical, analogue and mixed-signal, and IP areas, we address a unique, highgrowth segment of the semiconductor industry. Our total available market includes video transport, optical module components, backplane/data interfaces, consumer connectivity (e.g., HDMI, DisplayPort), analogue IP licensing, and BST technology and we anticipate these segments to achieve above average industry growth.

Our 2008 goal is to grow faster than the semiconductor industry based on new product introductions in our core business lines. We have made excellent progress with securing new designwins with our current customers and have achieved early market momentum with product wins in consumer connectivity. We will continue to increase our investment in R&D to drive accelerated product development to defend our position in core markets and capitalize on new opportunities in adjacent markets.

Now, with a stronger foundation resulting from our increased investment in 2007, we expect 2008 sales, marketing and administration expenditures to be reduced in the first quarter of 2008. We are committed to meeting our operating margin target of greater than 20%.

2007 has been a remarkable year of transition for Gennum. With the changes we have made and will continue to make, we believe Gennum will be well positioned to capitalize on the rising demand for optical, analogue and mixed-signal, and IP solutions in Asia, Europe and North America. Our global sales organization added vital resources and support in regions critical to future growth. Investments made in R&D and Snowbush Microelectronics’ IP will allow us to bring more products to market faster. Management is confident these changes will strengthen the Company and enhance shareholder value.

Dividend
Gennum’s Board of Directors has declared a regular cash dividend of 3.5 cents per share to be paid on February 26, 2008 to shareholders of record on February 12, 2008.

Download the complete financial results (PDF)

About Gennum
Gennum Corporation (TSX: GND) designs innovative semiconductor solutions and intellectual property (IP) cores for the world’s most advanced consumer connectivity, enterprise, video broadcast and data communications products. Leveraging the company’s proven optical, analog and mixed-signal products and IP, Gennum enables multimedia and data communications products to send and receive information without compromising the signal integrity. An award winner for advances in high definition (HD) broadcasting, Gennum is headquartered in Burlington, Canada, and has global design, research and development and sales offices in Canada, Mexico, Japan, Korea, Germany, United States, Taiwan, India and the United Kingdom. www.Gennum.com.

Gennum Media Contact:
Keri Fraser
Gennum Corporation
613-270-0458 x 2909
keri.fraser@gennum.com

Gennum Investor Relations Contact:
Gord Currie
Senior Vice-President, Finance & Administration and CFO
Gennum Corporation
(905) 632-2999 x3060
gord.currie@gennum.com

Caution Regarding Forward-Looking Information
This news release contains statements which constitute forward-looking statements. These forward-looking statements are not descriptive of historical matters and refer to management’s expectations or plans. These statements include but are not limited to statements concerning: Gennum’s plans and expectations relating to improvements in profitability and cash flow and the achievement of business model targets and levels, the reduction of corporate and operations costs and capital expenditures and marketing, sales and administration expenses; expected operational expense savings and estimated severance and related costs, and the estimated charges relating thereto and to impairments; and Gennum’s business objectives and future financial performance and prospects. Inherent in forward-looking statements are risks and uncertainties beyond Gennum’s ability to predict or control including but not limited to risks associated with: Gennum’s ability to complete the actions referred to in this news release within anticipated timeframes and to successfully realize the expected improvements therefrom; compliance with local employment legislation and requirements and the possible initiation and outcome of legal proceedings; and other risks facing Gennum’s business including competitive and pricing pressures and economic cycles in the semiconductor industry, fluctuations in foreign exchange rates and their potential adverse impact upon Gennum’s financial results, and Gennum’s ability to attract and retain key personnel necessary for its business. Please also refer to the sections entitled “Risks and Uncertainties” in Gennum’s 2008 annual report and “Risk Factors” in Gennum’s annual information form dated February 23, 2009. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this news release. Such statements are based on a number of assumptions which may prove to be incorrect including but not limited to the following assumptions: Gennum is able to successfully complete the actions referred to herein within the timeframe and with associated expense savings generally as anticipated and without unforeseen significant costs or delays; assumptions relating to severance and related costs and to charges; customer demand for Gennum’s products remains generally as anticipated; Gennum’s is able to execute its product roadmap without delays or disruptions having a material impact on Gennum; Gennum’s expectations relating to competitive pressures, including pricing pressures, are not materially incorrect; significant fluctuations in foreign exchange rates which significantly adversely affect Gennum’s financial results do not arise; and Gennum is able to continue to retain and attract technical and other key employees. Readers are cautioned that the foregoing list of important factors and assumptions is not exhaustive. Forward-looking statements are not guarantees of future performance. Events or circumstances could cause Gennum’s actual results to differ materially from those estimated or projected and expressed in, or implied by, these forward-looking statements. Consequently, readers should not place any undue reliance on these forward-looking statements. Forward-looking statements are provided for the purpose of providing information about management’s current expectations and plans relating to the future. Readers are cautioned that such information may not be appropriate for other purposes. In addition, these forward-looking statements relate to the date on which they are made. Gennum disclaims any intention or obligation to update or revise any forward-looking statements or the foregoing list of factors, whether as a result of new information, future events or otherwise, except to the extent required by law.